Chapter 9, Problem 4PSA

1.

Summary Introduction

Introduction: Journal entries are the first step in recording the financial transaction in the company’s accounting system. It works on a double-entry system.

To prepare: Journal entries to record the transactions and adjustments.

2.

Summary Introduction

Introduction: Warranty liability is the obligation which seller of product estimates while selling goods. This liability gets crystalize when the product doesn’t work as per the specifications and the seller admits his liability for the same.

To compute: Warranty expense reported for November 2017 and for December 2017.

3.

Summary Introduction

Introduction: Warranty expense is the warranty cost that is charged to profit and loss account on an estimated basis.

To compute: Warranty expense reported for January 2018

4.

Summary Introduction

Introduction: Estimated warranty liability is the provision created against the sales of the company for the warranty claims that may occur due to defective goods sold.

To compute: The balance of the estimated warranty liability as of December 31, 2017

5.

Summary Introduction

Introduction: Estimated warranty liability is the provision created against the sales of the company. It is created on the basis of the prudence concept to provide for all the losses in the future due to warranty claims.

To compute: The balance of the estimated warranty liability as of January 31, 2018.